Amazon sues former employee who took Google cloud job Amazon is taking a former employee responsible for managing its cloud partners to court over an alleged breach of contract after he joined Google. The e-tailer claims former AWS strategic partnerships manager Zoltan Szabadi joined Google too soon after leaving. The company alleges that by doing so, Szabadi broke the non- …
If the contract specified a blanket ban for a period the courts have deemed fair, and he broke that, then he is in breach of a contract he agreed to.
On the other hand if the contract specified activities he is not allowed to take part in, and he has agreed with Google not to do these things (and Amazon can't show he is doing them), then all seems good.
I guess it's too much to ask to figure these things out like adults without resorting to the courts.
In the UK, your company can put whatever they like in to your contract regarding no-compete clauses, and you are largely free to completely ignore them - your right to pursue legal employment outweighs the contract provision.
Only in specific scenarios can a no-compete be enforced, typically when a company takes out an injunction against another company from hiring their staff - and the High Court agrees - then if the second company does subsequently hire staff from the first company, that company can take relief from the second company (note - not the employee in question).
So that is probably the grey area.
In English law (don't know about the US), non-compete clauses are certainly enforcable if they are considered reasonable, relevant and sufficiently constrained to the employer's business interests.
Clauses (like this one) of 6 months or so are pretty common for senior staff, so at first glance it looks like this guy has a problem if he's agreed a six month period but started at Google within a month.
Anyway it'll be interesting to see what happens.
"if they are considered reasonable"
If they restrict the use of knowledge gained from the previous employer then that's reasonable. Saying someone can't work for a living in the field in which he is qualified is not reasonable.
However, if the contract stated that they would continue to be paid a retainer for 6 months after they finished so they wouldn't work for a competitor, then that would be fair.
Non-competes for general staff who are not in sales or marketing are generally crap. More than anything, the 'agreements' for general staff are there as an expense control mechanism for costs related to employee churn (there's also the 'snowflake' theory of HR, but that's more than a little psychologically fucked up). Unless you're willfully tied up in something really illegal then general staff aren't a threat to a business. They know about 90% less than they think they do about what's going on.
Key personnel, people in sales and marketing and management are a different story. Those people have far too much information to allow them to go directly to a competitor without bilateral enforcement agreements in place (the new employer agrees to honor the provisions in the non-compete and discuss possible exceptions with the previous employer before implementing them). For people in those roles it isn't difficult to have non-competes courts will uphold. Salary, benefits, access to information, relationships with customers and previous employment history are all factors considered by the courts.
It boils down to if you're in a position where a non-compete is justified, then the courts will uphold the non-compete. Most companies also have 'option ransom' schemes where unexercised or partially vested options are held in escrow until the terms of the non-compete are met (it's rare for them to last more than 12 months). People tend to play by the rules in very transparent ways if hundreds of thousands or millions of dollars are on the line.
In this case, it'll be very interesting to see why they thought the terms of the non-compete had been breached. Specific elements (no participation in Sales, no contact with previous clients, etc...) that do not prohibit the person from working are nearly always upheld by the courts. There isn't a decent size company in the US that doesn't have clear policies for assessing assignments of responsibilities to staff hired under an active non-compete. Hilariously, people have successfully sued their new employers if they didn't follow their own policies and assigned the person to a task in violation of the non-compete.
All in all it sounds like a real clusterfuck. My money says the person in question actively participated in sales related activities. The question is did he do it of his own accord, or was he told to do it?
To be a fly on the wall at the dole office.
"I see here you're claiming unemployment benefit, have you tried looking for work?"
"No, I'm not allowed to"
"I'm sorry? You're not allowed to? Why?"
"Well, I signed a document with my last employer that stops be working in anything that competes with them, and as it's so highly specialised, there's only 2 companies in the world who do this, so, as I left one, I can't work for the other"
"Ok... Well, can you do anything else?"
"Sorry, no, the document i signed was very broad, so you see, legally, I'm not allowed to work, thus that's why I'm here as I need money. If I get a job, my old company can sue me for everything, now, I don't know if they'd win, but I'd still need to pay for a lawyer to handle that, so to be safe, I'm avoiding working for 2 years"
"I'm sorry, we can't pay you unemployment unless you're looking for work"
"But my contract says I can't"
"From your last employer? Who you no longer work for?"
"yes"
"then you should get them to pay unemployment"
"I can't"
"Why not?"
"They're in receivership, not paying anyone"
"Why?"
"Because I was their expert, now I've left, there's no-one who can figure it out"
"what are you an expert in?"
"I'm sorry, I'm not allowed to tell you unless you have a certain security clearance"
http://steenandco.co.uk/thomas-v-farr-plc---important-court-case-on-non-compete-clauses-_60/
A 12 month clause was ruled enforceable by the High Court and the Court of Appeal.
And I found a suggestion somewhere that a restrictive clause might be presumed to run from after the end of any "gardening leave" not concurrently.
It's a weird one. Generally when you leave employment you are terminating your contract. Once a contract is terminated then it can't be in force.
Is it generally just technical or IT fields where it's considered "acceptable" that an employer tries to decide where an employee may work afterwards?
I think Sales has it's issues too, mostly around customer lists :)
That is straight up corporate theft, and I've thoroughly enjoyed the times that I've been asked to produce logs and evidence of a particular sales bod downloading client lists and corporate data the day before they hand in their notice.
"Is it generally just technical or IT fields where it's considered "acceptable" that an employer tries to decide where an employee may work afterwards"
In UK the contract is generally with the Ltd. company, rather than the person who is actually doing the work, (even if that person is the only employee of the Ltd. company). If said person claims employee rights they will fall foul of IR35 gubbins. Perfectly acceptable to put a restriction against the Ltd. side, (in fact that's good because it an indicator that they arn't an employee for tax purposes)
The EU ruled a while ago that non-competes are a restriction on the free movement of labour, and thus unenforceable in the EU. Free movement of labour trumps most things here.
Since Google are a multinational, they could have avoided this by just relocating the guy to the EU for the duration of the non-compete clause.
In the UK, your company can put whatever they like in to your contract regarding no-compete clauses, and you are largely free to completely ignore them - your right to pursue legal employment outweighs the contract provision.
Uh, not true in the slightest.
Unless the non-compete clause is way too onerous or restrictive (as decided by a court), you will be bound by the contract you signed. Courts can, and will, enforce non-compete clauses where there is a legitimate business interest.
There is plenty of case law on the subject which I'd suggest you look up before giving flawed advice like "you are largely free to completely ignore them".
I understand that the laws of some States make such restrictions illegal… So, just because something was signed or agreed to does not means it is legally binding.
E.g many of the T&Cs of popular web services contain stuff that would not be upheld by a court.
There is a big difference between Google taking on Amazon staff and the guy using his personal contact with Amazon staff to get them to leave for Google.
The class action was about the companies refusing to take on an exmployee who tried to get a job with them of his own free will, if they were working for one of the other companies that had agreed on the pact.
Organizational no-poaching and individual no-poaching are addressed, even in the EU, by separate laws. Organizational no-poaching is addressed under the broad category of Anti-Trust legislation. Individual no-poaching is addressed under very old IP regulation.
I dealt with that during the year I spent in London. Commercial interests long ago argued, successfully, that:
a) Prohibiting individuals from poaching staff from previous employers (for a predefined duration) gave the employer fair opportunity to negotiate in good faith to keep employees.
And
b) Individuals poaching staff from previous employers constitutes an HR activity and could lead to employees being lured away with promises the poacher didn't realize were illegal under HR related legislation. TL;DR, it's in the best interest of the employee if person to person poaching by ex staff is prohibited (nice to know they're looking out for you huh).
So yeah, it's enforceable in the EU too. Organizational poaching policy is terribly illegal, but prohibiting former employees from poaching current employees is not illegal.
> I dealt with that during the year I spent in London. Commercial interests long ago argued, successfully ...
The EU ruled on this very recently -- in the last two years, I think (though time flies by so fast these days I lose track). So any long ago argument has probably been superceded.
I know that non-compete clauses are largely worthless, and so my point is already implicitly covered, but I think that if a company wants to dictate a person's employment activities then they should be paying them.
Don't want someone to compete with you for 6 months? Pay their salary in the meantime.
I can see that preventing people misusing confidential company information after leaving is reasonable but that isn't the same thing as preventing them working at all in the field where they're qualified.
Seeing as this guy works in cloud services, I think it would entirely unreasonable to enforce this. There are only a few companies who offer services relevant to his experience, so what is he supposed to do? Stay at Amazon forever or go without a job. These types of thing used to make sense for general management because there was no requirement to work in the same sector, when your experience is so narrow in a field then such terms in contracts effectively prevent your leaving in reality and should be ruled unlawful.
Executives have non-competes that are often bigger and more complex than their employment contracts. When I was still reorganizing hedge fund acquisitions I was prohibited from working (in any way) for the competitors, vendors or clients of those acquisitions for 6-12 months. If the acquisition was something I was going to remove from public trading, so I could bang it around in private before deciding what to do with it, the restrictions were even more comprehensive and involved the SEC directly.
The non-compete at the company where I served as COO during the lead up to, and for 13 months after our IPO, the internal and regulatory restrictions were fairly crushing. If I had been insane and wanted to get back into a full time Executive role it would have been very difficult to dealing with all the bullshit. There was a six month quiet period after the 12 month post-IPO retention period where even discussing employment, of any kind, with a big list of potential employers was prohibited. Afterward there was a six month discretionary employment period where I had to inform my previous CEO of the talks and he could elect to be included, pitch a fit, or OK it.
So two full years of my professional life were incredibly controlled and my extant options were tied to compliance. I guess I could have sued, if I just really, really wanted to torture myself by getting another job as an executive at a publicly traded company, but fuck that. I had what I came for and wasn't going to risk it by suing for more anti anxiety meds, so I was going back to engineering and manufacturing for fun and profit.
At any rate, executives are under tremendously restrictive competition agreements. It's part of the job. Where it is unfair to non-execs is that there's no chance executives won't be compensated during the restrictive period. It's just the way it works. It should work like that for everyone.
...still unenforceable I'd suggest.
In reality, almost everyone that leaves an employer goes to work for a competitor. Unless you're changing careers or retiring, there's going to be some overlap in specifics that make your current skills, knowledge, and experience relevant to the next employer.
I understand not breaching laws around confidentiality or IP, but ultimately you can't forget all that you know (contacts, processes, prices, systems etc) just because that would be best for your previous employer.
Not only can you not forget things you've learned with past employers, what you've learned through those experiences is what increases your value, salary and opportunities.
The tech sector has the absolute worst view of law imaginable. The industry, as a whole, sees law as a digital system: Yes/No, On/Off, Black/White. The trouble with that, is the only place where legal systems are designed that way are monarchies and dictatorships. If you try to cram absolutes into a variable system you get clusterfucks like we've got here.
Non-competes were never intended to apply to most employees. They were designed to industry and staff grow (can't get promoted if nobody ever leaves) while protecting the companies, and their current employees, from being damaged by ex employees with strategic information and no scruples.
Non-competes weren't supposed to keep coal face workers from moving to another pit. That 95%+ of employees are interchangeable and replaceable. That's not a swipe at those workers, it's a function of organizing a sound business. If people who aren't involved in Director level and higher decision making have access to strategic company information then you've got way bigger problems than those people leaving. Fuck, what happens if they die? If there's no succession plan for a position it's a really good indicator there shouldn't be a non-compete involved.
Bunch of dummies. You're leaving the company. they can't enforce it. They're trying to do a quickie there.
I worked for a major multi-national [now broken into pieces] that normally gave a month severance for every full year of service. Unfortunately in my jurisdiction, severance isn't guaranteed. In addition a labor law did say that since it was a layoff they could hire anyone in a similar position for up to a year. So, they said sign the waiver to kill the labor law or you get no severance. I didn't give a crap. I signed. Took them 11 months to hire a "replacement".
As long as the clause doesn't stop him from making a living and is not tough, I can't see the guy winning this case. He signed the clause when he started to work at Amazon and most companies have "exit interviews" where they generally discuss the clause.
It makes no difference what kind of agreement the guy has with Google. it is Amazon's clients and data that are the issue.
If the applicable law is from the state of Washington then he won't have much of a case. OTOH, if the applicable law is from California, then Amazon can pretty much intercourse themselves as California permits enforcement of non-compete clauses in very narrowly defined circumstances AND Amazon would have to pay for the guy's salary during the duration of the non-compete clause.
One of the major reasons for Silicon Valley being what it is was that employees were free to move between companies.
Amazon would have a case if the guy divulged trade secrets, but they are pretty much barred from prior restraint in Calif.
One of my first jobs, as a school leaver many years ago, was with a company that cleaned new-build houses after the builders had finished. A clause in the contract specified that I would not work in a related sector (any job involving cleaning anything) for a period of 12 months after finishing work for them.
I didn't sign the contract, and they never asked for it. When I came to leave (to go to another cleaning job that paid a lot more), they started agitating, so I pointed out that they actually had no signed contract, and if they wish to enforce such a nonsense and restrictive term, I would expect to be paid during those 12 months. A lot of threats, but I went to my new job and never heard from the old employer again. Makes me wonder how many people in all walks of life have supposed restrictions like this slipped into their contracts...
(that was a sarcasm).
That aside, it seems that, when it comes to terms of employment, US corporations in general have gone completely insane. Most of us earn a living under "employment-at-will". In HR's mind, employment-at-will doesn't mean what you think it means. They believe that it means it's some kind of insane one-way contract: the employee is expected to abide by a number of clauses and restrictions, but the corporation is always free to do as it pleases, and no T&C's ever apply to the corporation.
It sounds like WA State is a bit more conservative than the Northeast US, since their court upheld at least part of the non-compete clause. In the Northeast US the non-compete clause would have been thrown out of court at the first hearing. For a non-compete clause to be enforceable in any way, the corporation has the burden of proof.
No. But the contract might have specified the applicable jurisdiction (Washington in this case) in advance. Many contacts do. This is in general to the company's advantage, since in case of a dispute the employee, who normally has limited resources, will have to arrange for legal representation (and maybe appear in court) in a far away and often foreign land with unfamiliar laws.
In Germany, non-compete clauses are only enforceable if they are accompanied by full pay for the duration. So essentially, it's equivalent to an enforced garden leave. It's also limited in duration (I believe 6 months). Of course, it makes employees less attractive to competitors, because it gives you a notice period of 7 (or more commonly 9) months, but for most companies it's not worth to pursue it.
In all other cases, trying to enforce such provisions are met with outright rejection by courts, as it constitutes a restriction of trade not mandated by a court of law or authorised professional body.
I've always had a problem with contractual terms such as this; Firstly because all bets should be off as soon as your former employer stops paying you, the contract should only be enforcible so long the employer is keeping up their side of things - that is to say paying you for the work you do; And secondly because in many specialized jobs the only people you would be able to go to work for are the competition. IOW such contract clauses are specifically designed to prevent you finding alternative employment and are, as such, unreasonable.
I've always had a problem with contractual terms such as this;
You do read an employment contract before you sign it, yeah? Some people don't until it's too late.
If you have a theoretical or moral problem with a non-compete clause, you can:
a) negotiate with the other party to remove it from the contract before you both sign, or
b) decide not sign the contract
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